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Why is IAU significantly trailing the gold spot price

Posted: Thu Mar 26, 2020 10:46 pm
by ppnewbie
IAU price is 15.61 and the gold spot is 1624. Are they having a hard time keep up with the volatility of gold at the moment? I hope this ETF stays solid because my 401k did not really have any for physical gold ownership.

Re: Why is IAU significantly trailing the gold spot price

Posted: Thu Mar 26, 2020 10:56 pm
by Tortoise
Gold ETF share price typically erodes slowly over time relative to gold spot price to pay fund expenses. It’s normal.

Re: Why is IAU significantly trailing the gold spot price

Posted: Fri Mar 27, 2020 3:09 am
by ochotona
Tortoise wrote:
Thu Mar 26, 2020 10:56 pm
Gold ETF share price typically erodes slowly over time relative to gold spot price to pay fund expenses. It’s normal.
They might someday do a split to re-peg to gold, but probably not until it gets way worse, if ever

Re: Why is IAU significantly trailing the gold spot price

Posted: Fri Mar 27, 2020 12:15 pm
by ppnewbie
Thanks! So does it seem accurate to say that my expenses for holding IAU are actually the Expense Ratio plus the decay from spot price? The ER is 0.25% and the decay is about 5.5%.

Re: Why is IAU significantly trailing the gold spot price

Posted: Fri Mar 27, 2020 12:19 pm
by Tortoise
ppnewbie wrote:
Fri Mar 27, 2020 12:15 pm
Thanks! So does it seem accurate to say that my expenses for holding IAU are actually the Expense Ratio plus the decay from spot price? The ER is 0.25% and the decay is about 5.5%.
The decay is the ER. The current 5.5% difference between IAU and gold spot price is the cumulative effect of years of that ER-driven decay.

Re: Why is IAU significantly trailing the gold spot price

Posted: Fri Mar 27, 2020 2:27 pm
by ppnewbie
Thanks. makes sense